When is Refinancing Worth it?

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Ever heard the pearl of wisdom that states you should only consider refinancing if the new interest rate is at least 2 points lower than your current rate? That might have been sound advice a while back, but as refinancing has been costing less over the last few years, it is never the wrong time to explore the options of a new mortgage loan! A refinanced mortgage loan is often worth its cost several times over, considering the benefits that it brings, as well as a reduced interest rate.

Advantages

You might be able to bring down your interest rate (sometimes by a lot) and reduce your monthly payment amount with a refinanced loan. You also might be given the option of pulling out some of the equity in your home by "cashing out" some money to renovate your home, consolidate debt, or plan a special vacation. You could be able to refinance to a shorter-term mortgage, enabling you to add to your home equity faster.

Expenses and Fees

As you probably know, you'll have some fees and expenses during the process of refinancing. You'll pay the same kinds of expenses and fees as with your existing home loan. Among these may be settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.

Doing the Math

You might consider paying points to receive a better interest rate. When you pay (on average) 3% of the mortgage loan amount at the start, your savings for the life of the new mortgage can be great. We recommend that you talk to a tax professional before acting on advice that the paid points can be deducted on your federal income taxes.

Another thing about taxes is that if you lower your interest rate, of course you'll also be reducing the interest amount that you'll be able to deduct from your federal income taxes. This is one more expense that borrowers take into account. Call us at (207) 571-8034 to help you do the math.

All things considered, for most the total of up-front costs to refinance are paid back soon in monthly savings. We will work with you to determine which loan program is the ideal fit for you, taking into account your cash on hand, the likelihood of selling your home in the near future, and the effect refinancing may have on your taxes. Call us at (207) 571-8034 to get you started.

Curious about refinancing? Call us at (207) 571-8034.